Libor scandal: regulators launch global review

Global regulators are to launch one of the widest reviews of interbank lending
rates and establish a taskforce to examine whether current benchmarks are
fit for purpose in the wake of the rate-rigging scandal.

2014 could be a good year to invest in British sharesPhoto: Getty Images

Mark Carney, chairman of the Financial Stability Board (FSB) and incoming Governor of the Bank of England, said the steering group would examine whether existing benchmarks and possible replacements met international standards.

“We have to recognise that even some transaction-based benchmarks could be manipulated; it depends on the depth of the market,” Mr Carney said on Tuesday.

The group will chaired by Martin Wheatley, the chief executive of Britain's Financial Conduct Authority, which is responsible for policing Britain's banks, and Jeremy Stein, governor of the US Federal Reserve Board.

The steering group, made up of “market participants” from around the world, will report back with its findings by the “summer of next year”, said Mr Carney.

Under the FSB plan, banks and other market players “will lead analysis and potentially make suggestions for alternatives,” including improvements to existing benchmarks.

Mr Wheatley led a review of the interbank market last year in which he recommended that bankers be sent to jail if they fraudulently fixed interest rates or any other market.

Mr Wheatley has also suggested that Libor could be replaced with a dual track system, with survey-based lending rates running alongside transaction-linked indices. He argued that such a system would provide continuity for holders of trillions of dollars worth of existing contracts that referenced Libor.

The International Organisation of Securities Commissions is also working on global principles for benchmark rates.